Islamabad: The government’s first serious attempt to privatise Pakistan International Airlines (PIA) failed on Thursday. Blue World City, the only bidder, offered Rs10 billion for a 60% stake in the airline—far below the minimum price of Rs85 billion set by the government. The gap between the offer and the required price led to the cancellation of the bid.
The bidding event, televised publicly, was brief due to Blue World City’s status as the only participant. The company offered Rs10 billion, representing just 12% of the minimum Rs85 billion sale price. In dollar terms, this translated to an offer of $36 million against the government’s expected $305 million.
The Privatisation Commission board and the Cabinet Committee on Privatisation met separately before the bidding. They approved the Rs85.03 billion price. No federal ministers attended the ceremony, which was only observed by two federal secretaries.
Saad Nazir, owner of Blue World City, stated the firm had considered the government’s offer but opted to stand by its initial bid. “We have decided to stay with our best offer of Rs10 billion,” he announced after the government invited the company to meet the asking price, which it declined.
Initially, six companies were pre-qualified for the bidding process. However, five of these companies withdrew after disagreements over conditions tied to tax liabilities, mandatory investments, fleet expansion, and employee retention. The companies that exited included Arif Habib Corporation Limited, Fly Jinnah, Younus Brothers, Holdings Private Limited, Pak Ethanol Private Limited, and Air Blue.
Blue World City had advanced further than expected, reaching the financial bidding stage. This attempt marked the government’s first substantial move to privatise PIA, Pakistan’s fourth-largest loss-making entity. To attract buyers, the government separated about Rs625 billion in PIA debt, shifting it into a holding company. PIA’s remaining liabilities totaled Rs202 billion, balanced by assets of approximately Rs163 billion. However, most of these assets were valued at book cost, leaving bidders cautious of PIA’s tax and contingent liabilities.
The failed bid raises questions about the future of the government’s privatisation plans for other state-owned enterprises. Following the bid submission, Blue World City’s Chief Operating Officer, Seham Raza, expressed disappointment over the lack of competition. “We bid out of respect for the national flag carrier, despite its financial issues,” Raza stated, lamenting the absence of other bidders.
Originally, the government planned to sell between a 51% to 100% stake in PIA but later settled on 60%. Bidders sought reduced taxes and duties and a ten-year tax waiver, which the government declined. Additionally, the terms required the buyer to reduce the average fleet age from 17 years to 10 over five years, demanding significant investment in new aircraft.
The government also expected the new owner to inject $500 million to $700 million into PIA to support operational sustainability. This amount would address PIA’s financial struggles and allow necessary upgrades. However, bidders found these requirements prohibitive.
The government proposed a compromise on employee retention, initially mandating a two- to three-year period before reducing it to one-and-a-half years. However, the terms remained unattractive to investors, and none proceeded with the bid except Blue World City, which declined to meet the final asking price.
Without new investment and resolution of outstanding liabilities, PIA’s future remains uncertain, warned Privatisation Commission Secretary Usman Bajwa in a recent statement.
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